Interactive Investor

The future for Boohoo’s share price

13th July 2021 08:45

Alistair Strang from Trends and Targets

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The online clothes giant has had its fair share of controversy, but can the share price bounce back?

Surprisingly, Boohoo’s (LSE:BOO) share price hasn’t fared particularly well during the lockdown period. In a time when online shopping was “it”, we’ve been expecting this retailer to flourish, something which clearly has failed to occur.

A suspicion about the online experience deteriorating led to a fascinating BBQ conversation. Due to “normal” allegedly returning in a week, the round table question was simple; “would people still buy online, when the attraction of all shops being open AND SAFE to visit returns?”

It transpired we were hosting a collection of converts to the online experience, several of the ladies present admitting to ordering multiple items from various retailers, secure in the knowledge they intended to send most of them back for a full refund. Free postage for “returns” made the option of buying varied choices, deciding which fitted or looked best, then going online to start the return process was easy. Apparently, a big part of shopping is trying stuff on, the attraction of traveling, carrying bags, parking now cheerfully left in the past.

It all begs the question, why is Boohoo’s share price not flying upward?

The answer perhaps lies in the past. Boohoo, even prior to Lockdown, had a successful online presence. Immediately following the Covid-19 drop in 2020, their share price soared to 430p, nearly 10% higher than we could calculate. Essentially, the price had already done all the hard work, spending the last 15 months fluttering around between the two quid level and four pounds.

Certainly, a seriously useful trading range, and one which only requires the share to actually close a session above 400p to signal a change in emphasis, with some true growth anticipated. In such an instance, we’re already projecting the potential of 544p, maybe even a secondary at 592p!

Unfortunately, for now we need examine the threat of near-term trouble.

By the close on 12 July at 289p, the share price kicked open the threat of “Lower Lows”. As a result, the immediate scenario suggests weakness below 286p risks reversal toward 265p initially, with our longer-term secondary, if broken, calculating at 246p. Making matters slightly worse, should 246p break, we can present 198p as a potential “bottom”, a level at which the share almost must bounce.

Glancing at the chart, this scenario giving 198p as a potential bottom makes a lot of visual sense. We’d suggest keeping an eye open in case such a level appears, as it gives an ideal entry level, if playing both the short-term or long-term games. In the short term, there’s a reasonable chance of grabbing a quick bounce. For the longer term, who knows where a bounce will lead as patience may deserve quite a strong reward in the future.

Source: Trends and Targets. Past performance is not a guide to future performance

Alistair Strang has led high-profile and "top secret" software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know "how it worked" with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.

Alistair Strang is a freelance contributor and not a direct employee of Interactive Investor. All correspondence is with Alistair Strang, who for these purposes is deemed a third-party supplier. Buying, selling and investing in shares is not without risk. Market and company movement will affect your performance and you may get back less than you invest. Neither Alistair Strang or Interactive Investor will be responsible for any losses that may be incurred as a result of following a trading idea. 

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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